Orange County producer gets 27 years in B-movie Ponzi scheme

An Orange County movie producer convicted of bilking mostly elderly investors out of $9.5 million in a Ponzi scam involving B movies such as “Confessions of a Pit Fighter” and “Lake Dead” has been sentenced to 27 years in state prison.

Mahmoud Karkehabadi (also known as Mike Karkeh), 56, the owner of Alliance Group Entertainment, was sentenced on May 31 by Superior Court Judge Richard Toohey after Karkehabadi was convicted in a five-week jury trial of 49 counts of securities fraud and grand theft. He faced a maximum sentence of 34 years.

Prosecutors said Karkehabadi and his associates promised investors annual returns as high as 35% on production loans to Alliance. The funds were supposed to finance the making of 2005’s “Confessions of a Pit Fighter,” starring the rapper Flavor Flav and the MMA champion Quinton "Rampage" Jackson; the 2007 horror thriller “Lake Dead"; and 2008's crime story “Hotel California,” with model Tyson Beckford, and thriller “Farmhouse,” with Steven Weber. None of the movies have any reported box office, according to boxofficemojo.com.

The California Attorney General’s office said that only a portion of the loans from more than 120 people across the country were steered to the productions and that only $535,000 in revenue from the films was deposited in their accounts in return.

“Karkehabadi promised his victims high-yield returns that he had no ability or intention to fulfill," said Nick Pacilio, a spokesman for California Atty. Gen. Kamala Harris. "This prison sentence reflects the seriousness of the multi-million dollar losses to innocent victims."

Income that some investors earned came either from other investors or their own deposits, the government said. Some of the $9.5 million went to pay for Karkehabadi’s luxurious lifestyle, which included homes in Burbank and Laguna Niguel and a Mercedes and a Hummer. Karkehabadi convinced some investors to roll their original loans over into future movie projects or extend dates for repayment.

Among the 20 victims who testified at trial was a family who put up their $1.4-million ranch as collateral for a loan to Karkehabadi. They have since lost the ranch and now live in a cabin without a bathroom.

In a press release announcing "Hotel California," Alliance was described as "a multifaceted entertainment company specializing in cutting-edge film, music and television projects."

In 2007, the California Department of Corporations sent a cease-and-desist letter to Karkehabadi and an associate ordering them to stop selling securities, including movie productions loans, in California.

Among their alleged violations were misrepresentations and omissions of material facts. The Department of Corporations then referred the case to then-Atty. Gen. Jerry Brown, whose office began an investigation in 2008.

"This con artist sold securities under the guise of a loan to fool investors and try to avoid following the rules," Brown said in a statement when Karkehabadi was charged in 2010. "He ran a cold and calculated scam, making promises he never intended to keep and using the funds of new victims to pay off the earlier ones."

The state secured a $5-million judgment against Karkehabadi in 2003 for credit card fraud, after which he filed for bankruptcy protection. Neither fact was disclosed to Alliance Group investors, according to the attorney general's office.

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